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Development Process of a new product/Service 1. IDea generation 2. product/service screening 3. concept development 4. Feasibility study 5. Prototype development 6. test marketing 7. product launch IDea generation The aim is to propose ideas to develop new products to increase sales and profits. Brainstorming meetings can generate new ideas. from staff and management Product screening: Screening involves considering the different ideas for new products and identifying which ones have the best potential for sales. Each proposed new product should be assessed as follows: 1. market requirements-what consumers want 2. is the finance available to produce and market the product 3. is the business capable of producing the product 4. what is the potential profit from investing in the new product 5. how does the proposed new product compare to competitors products in quality and price. Concept development This involves developing the idea to make it a reality, ie producing a new product. It is important to understand that a consumer only buys a product because it provides some benefit. This is called product concept. Feasibility Study 1. researching the market to test consumer reaction to the proposed new product. 2.Assessing the profits from projected sales. A positive reaction to the above 2 issues is necessary for the business to continue its investment in the proposed new product. Prototype (product) development This involves producing 1 unit or the new product to enable the marketing department to have it tested in the market. This is done by asking potential customers for their reaction to the new product in relation to quality, price, brand, name, packaging and how it compares to competitors products.
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Test marketing This is necessary to assess the reactions of potential customers in sales outlets in different locations. This enables a firm to use different forms of promotion and compare consumer reaction from different locations. The results from test marketing will enable the firm to assess with greater accuracy the potential sales, the different types of sales promotions methods to use and how to reduce the costly financial risk to consumers rejecting the new product. if the test marketing results are negative, the firm may decide not to launch the product. eg Guinness lite was launch in Galway city but was not a success and so not launch nationwide. Product Launch This is the final stage in the development process of a new product, when the product is launched onto the market. The firm has to advertise the product so that consumers know where it can be bought.
Identify opportunities
Internal source of business ideas
External sources of business ideas
From employees-some firms have suggestion boxes and pay a bonus for good ideas
Competitors-It is important for a firm to be aware where customers believe competitors to be better, including price, quality and after sales.
Brainstorming meetingsThese are discussion sessions involving management and staff
Customer requirements-it may become necessary to modify the design, packaging or price of the product to avoid losing customers.
Research and Development Research Agencies- Market research many large fims have an R&D department agencies may make suggestions for where highly skilled people are employed. change. eg enterprise Ireland R&D is expected to identify new opportunities for the business Feedback from customers-customer comments, complaints.
Foreign Travel_ ideas may come from observations made at foreign trade fairs.
SWOT analysis -carry out a swot analysis should get some ideas
Franchising-Understanding how franchising works may encourage some to set up a franchise eg Mcdonalds
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Public Procurement A firm may get the idea to tender the government contracts.
Market Research is the process of gathering, recording and analysing all the facts and data concerned with the transfer of goods, from producer to the consumer. Reasons for market research: Descriptive reasons- a firm may want to find out what is happening in the market. eg who are its customers, market share etc Predictive reasons -A firm may wish to predict what changes its customers will require in the Future. eg a travel agency will want to know what changing trends in holiday trends. Explanatory reasons-A firm may want to explain, to the public issues relating to its marketing. eg if there is a 20% in sales, the firm will want to investigate why? Exploratory reasons: a firm may want to check out the size of the market for a new product. this involves finding out the number of potential customers, their age and spending patterns. Compiling information from market research 1. Desk Research (secondary research) 2. Field Research (Primary Research) Desk research involves the using secondary data. It involves analysing all the available internal and external information compiled by other sources eg government agencies. Internal sources of information Some information may be in the records of a business. eg market research reports The sales manager should have information on previous sales to target market The finance department may have information on areas such as production costs. External Sources of information 1. Statistics published by the government eg trade stats on imports and exports 2. Reports published in magazines and newspapers 3. The household budget survey, which publishes the spending patterns of irish consumers on different kinds of goods. 4. The population census published by the central statistics office (CSO). this gives information about the population of Ireland. so the firm can estimate the size of the market 5. Information available on the internet.
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Field Studies involve market research done by contacting people in the target market to get new information (primary data) Field study methods: 1. Survey 2. Questionnaire 3. sampling 4. estimating 5. feasibility study 6. prototype 7. test-marketing 1.SURVEY The reason for carrying out a survey is to find out the potential of a new or existing product. The size of the survey group must be big enough to represent the target market, and so give reliable findings,. Mail surveys, email surveys, and telephone survey are used to get information. Usually some incentive is offered to return the questionnaire, such as being included in a special draw. This is not an expensive form of research but its relability depends on the accuracy of answers given by people. Generally the response rate is higher in telephone surveys rather than postal. 2.Questionnaire A questionnaire has to be carefully designed. Every person is asked the same questions. A poorly worded questionnaire can provide useless information to the firm. The questionnaire can be used to seek consumers opinions in areas such as products, quality, usage and interest in using the products. ● Every question must be simple and clear. ● if you want to know the age of person, give a choice eg 25-29, 30-34. ● avoid open ended questions unless opinions are required. 3.Sampling If a decision is to be made on the results of a sample then the sample must be reliable. and represent the target market A. Random sampling: People are chosen at random so each member of the population has an equal chance of being chosen. The accuracy and reliability of sampling will depend on the size of the sample in relation to the size of the market. B. Cluster Sampling: A Cluster of samples is selected at random, eg a random selection of people in new housing estates where there is a widely dispersed population. THis method is often used for opinion polls. 4. Observing:
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Information is gathered by watching peoples reactions in certain situations. This method is used by management in supermarkets in order to observe consumers buying habits eg when impulse buying. 5. Estimating The estimated size of the market is vital information for a business. when the size of the market is known then the firm must estimate how much market share they will get. information on market share can be taken from wholesalers, retailers, the firms marketing people, the firms own internal records. 6.Feasibility Studies This is an investigation of a proposal to assess the technical problems and potential profitability of a new product or idea. The results of this study determine whether or not a firm will proceed with its plan to produce a new product. A feasibility study will aim to provide the following information to a business: The estimated sales of the product the costs of production the impact on profits if the product is produced and marketed will the production process (eg batch production) have any environmental impact on the local area. A feasibility study is a reliable way of getting accurate information. it provides the firm with factual information so as to reduce the risk of losing money on a new product. 7.Prototype This is producing one unit of the product and seeing what problems arise in manufacturing, costing, selling price and unexpected costs. The prototype can be test marketed and the decision on whether or not to proceed can be made by management. 8.Test Marketing This determines the reaction of potential customers to the prototype. Based on consumer reaction, it may be necessary to modify aspects of the product, ie desing, size or price before mass or batch production quantities are made available. Test marketing reduces the risk of failure. Secondary research is cheaper than primary.